ISSUE # 44 .... AVH Expansion: Community AdvANTage or Fiscal Over-Reach?

"The advantage that hospitals have over other institutions is that hospitals are community-based. You can't outsource your work; you can't move your emergency department to Pakistan."     -- Mark Shields, columnist "In nothing do men more nearly approach the gods than in giving health to men." -- Cicero

 

This issue of The Red Ant is focused exclusively on Aspen Valley Hospital (AVH) and its proposed expansion.  There are many public benefits of such a grand plan, however there are also many weighty concerns worthy of community discussion and consideration.  Please be sure to read the new "Community Voices" section at the end of this issue.  

AN OVERVIEW OF WHAT'S GOING ON AT AVH 

It's 2010 and Aspen has outgrown its 25-bed community hospital.  Built as an in-patient facility in 1977 -- and given the shift to far more outpatient services today -- our aging community hospital has developed inefficiencies: overcrowding, lack of patient privacy and inappropriate patient encounters.  The Aspen Valley Hospital expansion master plan cites a focus on the decompression of existing space.  According to AVH leadership, with contemporary design and function standards, a new and upgraded AVH will be better positioned to address the medical issues already being treated there.   Aspen Valley Hospital is currently seeking city council approval for Phase 2 to further expand its facility and improve its existing services with a major outward and upward overhaul.  As part of a proposed 7-year timeline, Phase 2 would be the largest of the four phases, tripling the size of the 33-year-old facility from 70,000 to 215,000 square feet. Phase 2 would address patient privacy issues with new wing of private rooms, creating a logical segregation of services that improves the internal "flow" of the facility and the establishment of critical infrastructure for potential future expansion.   

THE PHASES

The expansion plans would create a health care "campus" on AVH's existing site, including the expanded hospital itself, medical office space, affordable housing and additional parking.  The phase-by-phase improvements are designed to take into account realistic expectations of what can be achieved while simultaneously managing the challenge of not disrupting services and compromising safety during construction.   Notably, each phase was designed to offer self-contained threshold improvements that can stand alone.   

PHASE 1:  Expansion and Renovation of Obstetrics - DONE (2008)

PHASE 2:  Improvements to zoning, segregation of internal traffic flow, privacy and space for operations such as upgraded patient care (from 25 to 36 refurbished private rooms), cardiac/pulmonary rehab and physical therapy relocated to a second floor, same day surgery moved to contiguous space with other surgery, relocation of food service and dining, 12,000 s.f. of medical office space, a basement receiving dock, a 220-space parking garage, affordable housing and site work (loop road and storm water retention ponds).  Currently in the approval process. (2010-2012)

PHASE 3:  New emergency department, new imaging department, expanded surgical operations, the remaining 15,000 s.f. of medical office space, an elevated helicopter pad above the ER, a new ambulance entrance and garage, and basement space for storage and non-clinical operations.  (2013-2015)

PHASE 4:  A new front entrance, new registration/admitting area, better-located outpatient services, and completion of garage and external traffic operations.  (2015-2016)  

DOCTORS' OFFICES AT AVH?

The AVH expansion proposes the addition of 27,000 square feet of medical office space in the new facility.  Designed to provide superior doctor-patient access, on-site medical office space is a new standard for modern hospitals.  But is this medical office space really needed at AVH?  At council's direction, city staff is currently looking into how much medical office space already exists in town. Meanwhile, The Red Ant has determined that 27,000 square feet is the equivalent of 2 x the Music Tent (seating area). As for the demand for such space, according to AVH sources, several local doctors have made early commitments to rent the new space.  (As a tax-supported public entity, AVH cannot under-cut market value rents in town to fill their space.)  The Red Ant thinks that on-site medical office space is a luxury that, frankly, we don't need, (especially given the additional mass and scale it would add to the facility), and cannot afford.  

THE IMPACT OF OTHER HOSPITALS IN THE AREA

AVH is a small community hospital, essential to our community for general acute care such as general surgical, medical and outpatient service.  Lucky for Aspen, AVH offers more than most community hospitals do, such as a fully-capable OB service, a non-invasive cardio program, a very strong orthopedic surgical program, chemotherapy services, trauma certification and a variety of state-of-the-art diagnostic tools.    Acknowledging that the duplication of services with nearby hospitals is a bad economic model, AVH leadership states their commitment to "managing the delicate balance between meeting the service-based needs of our community and keeping focused on what we do well."    There are several established medical centers within a 100 mile radius of Aspen.  Our proximity to world-class care in the region is well known, which has definitely raised concerns about our local needs vs. our willingness to travel to have them met.  It also raises the question of AVH's need (desire?) to compete with nearby facilities:

• Valley View Hospital (Glenwood)
• Vail Valley Medical Center (Vail)
• Shaw Regional Cancer Center (Edwards)
• Steadman-Hawkins Clinic (Vail)
• St. Mary's Hospital (Grand Junction)

AVH leaders reiterate that the hospital expansion is not intended to add services already provided by nearby hospitals, highlighting that in many cases, AVH already has strong relationships and collaborates extensively with Valley View in Glenwood, sharing specialists in urology, gastroenterology, ear-nose-throat, neurology and oncology. In addition, AVH regularly refers patients to Valley View's cath lab which compliments our cardiology program, as well as additional referrals to Shaw, St. Mary's, University of Colorado, Swedish and Presbyterian St. Luke's (in Denver), and such national centers as the Cleveland Clinic.   AVH also works with specific programs like Sally Jobe for breast health and Blue Sky Neurology at Swedish for their stroke program which provides real-time consults to the ER here.   But note, Valley View Hospital's CEO Gary Brewer recently told the Post Independent that the recent approval for the sixth and final phase (143,000 s.f. total -- 29,600 of which is a cancer center) of their 10-year expansion "will be the first step in moving the hospital ahead into the future as a regional health care facility."  If the valley is to soon have a large, brand spanking new "regional health care facility" 40 miles down the road, what do we REALLY need here in Aspen?  Shouldn't this factor into our local decision-making?!      

SHOW ME THE MONEY

Taking into account the uncertainties in our world today, just how big does AVH need to be, how much will it cost and frankly, most importantly, who will pay?    Projections at this stage are that the 4-phase AVH campus development will run in the neighborhood of $120 million.  For now, however, the only consideration on the table is Phase 2.  (The $6.5 million Phase 1 obstetrics center was completed in 2008, paid for with the remaining funds from a 2003 bond issue and hospital cash.)  AVH leadership is looking at a 4-pronged financing plan for its future expansion phases:  cash on hand + revenue bonds + philanthropy + general obligation bonds.    These numbers are a rough example, but consider:  the hospital currently has about $43 million in cash on-hand.  But, unlike the leadership at the city-owned Wheeler Opera House, AVH realizes that it cannot simply throw all this cash on-hand into the construction bucket.  Rather, AVH knows that it needs a minimum of 180 days worth of cash on-hand at all times, which is approximately $28 million.  So there is around $15 million available for Phase 2 from this source.  Then, given its bond rating from Moody's of BAA3 (which is based on operating revenue projections), AVH could raise approximately $26 million through revenue bonds.  These revenue bonds would be paid off through operating revenues of the hospital itself.  So, call it about $40 million currently available for Phase 2, without raising a nickel through philanthropy or general obligation bonds (the kind that we approve at the polls and repay with property tax increases).   The Red Ant has recently met with AVH leadership, and they assert that they will contract for and construct only that which they have the money to pay for -- the difficulty being that they don't yet know the final cost estimates and funding capacity of the four sources of funds.  One thing is certain, they say -- the funds that are available will be allocated to a construction scope that results in a finished stand-alone project, but many variables are "still in play."  (Especially the variable that includes the potential need for general obligation bonds.  Without knowing the costs, this will very likely enter into the near-term mix.)   In its typical, inimitable and predictably fiscally irresponsible fashion, the city planning department informed council before its first public hearing on Phase 2 that "concerns such as how the hospital plans to pay for its expansion and its policies related to treatment of patients with Medicaid and Medicare should not be considered" when evaluating AVH's Phase 2 expansion proposal. The Red Ant cries, "Horse-pucky!"  Our elected representatives should absolutely take "the money issue" into account.  If there is to be even the slightest, shortest, fleeting consideration of EVER needing public funds for a project, the "who pays" question is as important as any other consideration.  If AVH can independently, privately bring some version of Phase 2 to fruition, this too should be taken into full consideration.  

KINDA PREGNANT?

What the community does not need after a potential go-ahead on some version of Phase 2 is a "there's no turning back now" scenario that mandates further, immediate construction, and worse, general obligation debt financing to "complete" the project.  The Red Ant fears an immediate (and likely) rush to get a bond measure on the next ballot for Phase 2.  Will the push for approvals and financing for Phases 3 and 4 (and specifically the bonds needed to fund them) then begin as soon as work on Phase 2 gets underway?  Will the community be given time to assess the needs for further expansion before said expansion begins?  The aggressive timeline indicates no.  The timeline should definitely change.  

MORE AFFORDABLE HOUSING!?

As with any development project in town, yes, you can bet there is yet another affordable housing mandate built into the AVH expansion plan.  Early estimates have the design and construction costs at $5-$6 million. (Affordable for whom? That's a minimum of $227K/unit subsidy!)  If it must be so, The Red Ant appreciates that the 22 units would be studios and 1-bedroom units for working professionals of the hospital itself.  (With AVH retaining ownership of the units and renting these to their employees, the horrific issue of unit neglect and no oversight of HOA management/reserves that plagues much of the local "owned" affordable housing becomes moot.)  On the other hand, however, much like affordable housing throughout the valley, the AVH housing stands out like a sore thumb -- high-density, bright lights in a rural setting -- and is distinctly the blight of the AVH campus.  The good news is that council recognized this at the first public hearing and the mass and scale is likely to be reduced. But really, is this affordable housing really needed? On-site? At this stage?  

COMMUNITY APPROVAL - TIMELINE

• Council conceptual approval of the Master Plan (May 2009)
• P&Z approval of the Master Plan (April 2010)
• Council approval of Phase 2 (meetings begin June 2010) 
• Voter approval specific to funding (bonds) - TBD
• Council approval of future expansion phases - TBD

AVH: SOME SERIOUSLY GOOD STUFF....

An update of the AVH facilities seems absolutely appropriate at this stage of its lifecycle.  If you've been there as a patient or visitor, you know why.  And the proposed contemporary layout and design standards will surely improve service and care.  Plus, these upgrades will likely enable AVH to attract and retain the best doctors and staff.  We are very fortunate to have such an exceptional community hospital here.  And this is as good a time as any to consider and weigh the decisions about a partial or full-blown hospital expansion.  The Red Ant says, "Good work, AVH. You have demonstrated significant improvements in fiscal discipline in recent years, and your willingness to step forward with significant private contributions for a sizable facility upgrade is a noteworthy sign of your on-going commitment to the community."   

AND THINGS THAT MAKE YOU GO HMMMMM....

The time to ask the hard questions is right now.  It is imperative that we collectively gain comfort with the answers and contingencies -- for the current proposal as well as AVH expansion beyond Phase 2. 

• Are there future commitments and risks that we're not recognizing or weighing as a community or as Aspen property owners? 
• 27,000 square feet of on-site medical office space?  This may be how it's done at state-of-the-art medical centers elsewhere, but do we really need this additional density (not to mention expense) at AVH, especially given the commercial office space vacancies in town?
• In the evolving "new healthcare environment," what happens if/when AVH is told what they can charge for services and therefore cannot generate enough operating revenue to service their revenue bonds?  Who then picks up the tab?
• Currently 22% of AVH's patients are covered by Medicare and Medicaid, and the hospital writes off $2.5 million in unpaid patient billings each year.  What happens to AVH's ability to sustain its high level of service and projected revenue if/when both of these numbers increase dramatically?
• With a 4-phase planned build-out, is the risk not ultimately being borne by the taxpayers?  Is this facility being funded by the people who need the services, or is there some coercion by parties that will not be held accountable down the road?
• Would the size and structure (and scope and cost) of the project be any different if it were financed strictly with private dollars?  (Fiscal discipline with private vs public dollars is often self-regulating.)
• Given the imbalanced demographics of the Aspen electorate, general obligation bond issues usually pass.  Can Aspen's tax-paying property owners sustain/justify/afford the increases in property taxes to commit to and complete a 4-phase AVH campus build-out in the current economy?
• Do we really need more affordable housing, or is this just a standard government mandate?  In recent years, the supply-demand dynamic for affordable housing has changed dramatically. Wouldn't $5-$6 million, if it were available, be better spent by the hospital specifically on the community's healthcare needs?
• The developers have done a notable job fitting this 215,000 square foot facility into the hospital's current 19-acre Castle Creek Road location.  But just because they can do it, does this justify the added density at our gateway to the Maroon Bells and Ashcroft?

THE RED ANT SUGGESTS:

Aspen is a community that loves its entitlements.  And a modern, state-of-the art hospital certainly fits that bill.  But, Phases 1 and 2 sound like they're nearly covered - privately (in the financial sense).  For what's not economically feasible with available (read: private) funds for Phase 2, hold off.  Lose the medical office space, push back on the affordable housing, and downsize the parking to complete Phase 2 without going to the taxpayers for general obligation bonds. We surely can't trust city council to recognize that general obligation debt financing is anything other than free money!  

Besides, at the completion of Phase 2, the hospital will be fully functional and a major improvement to the existing facility.   If Phase 2 is all the community wants (and is willing to afford), Aspen will still have a world-class hospital with logical and efficient flow, private patient rooms, cardiac rehab, improved physical therapy and significant fixes to surgery (without rebuilding it).  There should be no rush toward further expansion until Phase 2 is complete and its contributions and solutions are assessed.  With this new infrastructure in place, future expansions are certainly possible.  But let the community decide.  In due course.  

Additionally, The Red Ant has recently learned of AVH's "next" expansion  effort -- above and beyond the aforementioned $120 million project.  It seems that the Aspen Medical Foundation has recently commissioned a study for a separate, large "continuum of care" facility on another nearby site.   This project will be comprised of 100 units for independent living, 40 assisted living units and 20 nursing home units.  Yes, it's true -- our demographics are definitely changing.  And this could likely enable AVH to convert the Whitcomb Terrace Assisted Living facility next to the hospital into affordable housing instead of building the new structures, but "Whoa, Betty!"  This is an enormously ambitious financial undertaking for our community in a tough economic environment!    The Red Ant does not see debt financing as free money -- probably because it's not.  AVH's ambitious plans are clearly on the fast track for public financing.    Let's get ahold of this runaway train.  

COMMUNITY VOICES - NEW!!

The Red Ant is pleased to introduce a new feature that presents citizens' perspectives on the critical issues.  Please enjoy and consider the contributions of Aspen Valley Hospital CEO David Ressler followed by AVH neighbor and businessman David Ducote on the subject of the AVH expansion:  

• RESSLER

The current Aspen Valley Hospital facility was built in 1977, at a time when services were oriented toward inpatient care and longer lengths of stay. At the time, Aspen already had a substantial need for emergency and trauma services, thus resulting in a sizable emergency room for the size of the community. In addition, the hospital was ahead of its time by having included several private patient rooms, with the remainder of the rooms having two beds. The hospital was located on a beautiful large campus on the outskirts of town, with easy access for the community and plenty of room to grow and expand as needs would later dictate.  

Today, the facility is over 30 years old and is no longer a contemporary example of a modern hospital plant. Healthcare is no longer delivered in the same manner as it was 30 years ago, and there are technologies/services provided today that did not exist when the facility was designed and constructed. Consequently, as patient care has increasingly shifted to an outpatient environment, and as new services and technologies have been acquired to better meet the needs of the community, the facility has undergone a transition in which the outpatient departments have invaded former inpatient spaces.  

The impact of the invasion of inpatient space is that the hospital is now improperly "zoned." Inpatient, outpatient, service and public purposes are all inappropriately intertwined and commingled. In addition, there is inadequate space in virtually every department for modern patient-centered care, evidenced by a lack of privacy and "mix" of inpatients and outpatients.  Curtains are often the only barrier between patients while walls are now the contemporary standard.  

In 2005, the AVH Board of Directors commissioned a needs assessment to evaluate the facility's adequacy and determine if a "right-sized" hospital could be located on the existing site. The results of the needs assessment, which assumed the same breadth of services over a minimum 20-year time period, demonstrated that virtually every clinical department is approximately half the size that it should be by today's healthcare standards.  

In addition, it was determined that the hospital campus should incorporate medical office space and co-locate local physician practices within the hospital they clinically support. This is an essential component of a modern healthcare campus and enables timely medical and surgical care to patients. Also, it affords patients with access to modern physician offices with the availability of the full range of diagnostic tests available on-site. 

Finally, the needs assessment determined that the existing hospital campus was the best site for expansion.   The Master Facilities Plan is the product of these efforts and represents a phased approach to achieving a modern and appropriately sized facility based on contemporary standards. It also achieves the explicit board-directed goals of being environmentally responsible and sensitive to the neighborhood and community impacts of light, noise and views.  After a great deal of input and analysis, and with the support of the staff, it has been designed to serve the medical needs of the community for decades to come.   

• DUCOTE

I writing to express my concerns related to the proposed Aspen Valley Hospital expansion adjacent to the Meadowood Subdivision.  Meadowood is a low density neighborhood with vast open spaces, excellent views and a general feeling of integration into the natural landscape.  Meadowood also maintains a large open area (adjacent to the existing hospital facility) for recreation, hiking and cross country skiing.  This area is for the benefit of Meadowood residents and the general public.  

Unfortunately, the scale and scope of some commercial facilities adjacent to Meadowood do not adhere to the benign characteristics of a residential neighborhood.  The high school and hospital are both standouts in their respective visual impacts on the area.  However, despite the size, unattractiveness, traffic demands, servicing requirements and other operational impacts of these types of facilities, hospitals and schools are clearly necessary institutions in a well-functioning community.   The hospital expansion, as proposed, crosses the line between functional community services and related infrastructure which are responsibly planned -- into the area of public sector fiscal and aesthetic recklessness.  

The hospital seeks to develop operational capacity so that it can effectively compete with newer, more efficient alternative health providers down valley.  In addition to simply serving the primary community, the institution also wants to become a health services "destination."    The fact that a proposal of this enormity is in process without material input from adjacent residential homeowners is beyond comprehension.  In a municipality that micromanages every aspect of development and regularly intrudes on the private property rights of its citizens and property owners, how is a project of this financial and environmental scope sailing along without the typically arduous (and frequently ridiculous) obstacles placed upon other private developers?  

I suspect that part of the explanation is that the quasi-public nature of the hospital, coupled with the umbrella of public need, effectively "immunizes" the institution and its plans from proper scrutiny.  This should not be the case.  The hospital expansion should be subject to the same public scrutiny, impact assessments and financial viability tests as any other project. 

While the proponents will advocate that this exercise has been undertaken, the fact is, it has not.   If a developer wanted to put 85,000 square feet of new retail, a 12,000 square foot office building, a 220-space garage and 22 condos on the hospital site, would we be having the same discussion?  The fact that the hospital provides a necessary public service may mitigate traditional barriers to growth encountered in the Aspen community.  It does not eliminate them.  

The Aspen Valley Hospital project needs to be completely re-assessed.  The hospital is aged, improperly sited and an outgrowth of ineffective historical planning. The expansion is a huge economic bet where administrative bureaucrats are putting substantial taxpayer dollars at risk in an uncertain environment.  It is also too big and too detrimental to an area surrounded by residents, wildlife and untouched natural landscape.  The "compounding" nature of the hospital's requirements, in that primary hospital space expansion begets the office space need which begets a huge parking requirement which all allegedly begets the criminally stupid 22 subsidized housing units, makes this project untenable as planned.   Please seek a more rational and balanced approach to accommodating the healthcare needs of the Aspen community.    

THE NEXT COUNCIL MEETING

City council will be meeting again on the subject of the AVH expansion, Phase 2, on Monday, June 28, at 5:00pm at city hall.  There will be time for public comment.  The Red Ant encourages you to attend.